Question 1

If the world real interest rate falls,then a country that is a net foreign lender

Accepted Answer

A)  increases the amount of its lending. 
B)  does not change the amount of its lending. 
C)  decreases the amount of its lending. 
D)  None of the above answers is correct because lending might increase, decrease, or not change.

Question 2

Which of the following is correct?

Accepted Answer

A)  As disposable income increases, the real interest rate increases. 
B)  As disposable income decreases, saving decreases. 
C)  As saving decreases, disposable income increases. 
D)  As saving increases, investment by households decreases.

Question 3

In the global loanable funds market,

Accepted Answer

A)  loans of equal risk will have equal interest rates. 
B)  riskier loans will have lower real interest rates than safer loans. 
C)  interest rates for all types of loans will be equal. 
D)  safer loans will have higher real interest rates than riskier loans.

Question 4

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

Accepted Answer

The answer of What is the influence of the expected...

Question 5

At the beginning of the year,Tom's Tubes had a capital stock of 5 tube inflating machines.During the year,Tom scrapped 2 old machines and purchased 3 new machines.Tom's net investment for the year totaled

Accepted Answer

A)  1 machine. 
B)  2 machines. 
C)  3 machines. 
D)  6 machines.

Question 6

In 2008,Germany had a budget deficit of 37 billion euros. This will budget deficit ________ the supply of loanable funds and ________ the real interest rate.

Accepted Answer

A)  increased; lowered 
B)  decreased; raised 
C)  decreased; lowered 
D)  increased; raised

Question 7

In 2007,Singapore's government ran a budget surplus of $4.5 billion. The budget surplus ________ loanable funds and ________ the real interest rate.

Accepted Answer

A)  increased the supply of; lowered 
B)  decreased the demand for; lowered 
C)  increased the supply of; raised 
D)  increased the demand for; raised

Question 8

The real interest rate is ________ in the United States compared to Zimbabwe because ________.

Accepted Answer

A)  lower; there is a lower risk premium in the United States. 
B)  higher; more firms want to borrow financial capital in the United States. 
C)  lower; the United States is a net borrower. 
D)  higher; Zimbabwe is a net borrower.

Question 9

Suppose a firm has an investment project which will cost $200,000 and result in $30,000 profit. The firm will not undertake the project if the interest rate is ________.

Accepted Answer

A)  greater than 15 percent. 
B)  greater than 10 percent. 
C)  greater than 5 percent. 
D)  positive.

Question 10

If the Ricardo-Barro effect occurs,an ________ in saving finances the government budget deficit and the real interest rate ________.

Accepted Answer

A)  increase; remains the same 
B)  decrease; increases 
C)  increase; falls 
D)  decrease; remains the same

Question 11

In January 2013,Tim's Gyms,Inc.owned machines valued at $1 million. During the year,the market value of the equipment fell by 30 percent. During 2013,Tim spent $200,000 on new machines.During 2013,Tim's net investment totalled

Accepted Answer

A)  $1 million. 
B)  -$300,000. 
C)  $200,000. 
D)  -$100,000.

Question 12

The nominal interest rate minus the real interest rate approximately equals the

Accepted Answer

A)  rate of increase in the amount of investment. 
B)  inflation rate. 
C)  the rate of increase in the income. 
D)  the rate the bank receives to cover lending costs.

Question 13

National saving equals

Accepted Answer

A)  household saving + business saving. 
B)  household saving + business saving + government saving. 
C)  household saving + business saving + net taxes - government expenditure. 
D)  Both answers B and C are correct.

Question 14

What is the relationship between the real interest rate,the supply of loanable funds and the demand for loanable funds?

Accepted Answer

The answer of What is the relationship between the real...

Question 15

In the global loanable funds market,

Accepted Answer

A)  funds flow into countries with the highest risk-adjusted interest rates and out of countries with the lowest risk-adjusted interest rates. 
B)  funds flow into countries with the lowest risk-adjusted interest rates and out of countries with the highest risk-adjusted interest rates. 
C)  when funds leave a country, a shortage of funds lowers the real interest rate. 
D)  when funds enter a country, a surplus of funds raises the real interest rate.

Question 16

-In the above figure,if the real interest rate is 4 percent,then there

Accepted Answer

A)  there is a surplus of loanable funds. 
B)  is equilibrium in the loanable funds market. 
C)  the real interest rate will rise. 
D)  the demand curve for loanable funds will shift rightward.

Question 17

The demand for loanable funds curve is

Accepted Answer

A)  downward sloping when plotted against the real interest rate. 
B)  vertical at the full employment level of investment. 
C)  constant at the maximum expected profit rate. 
D)  upward sloping when plotted against the real interest rate.

Question 18

As a result of the recession in 2008,the default risk increased. How did this change affect the loanable funds market?

Accepted Answer

A)  There was a movement up along the supply of loanable funds curve. 
B)  There was a leftward shift in the supply of loanable funds curve. 
C)  There was a movement down along the demand for loanable funds curve. 
D)  There was a rightward shift in the supply of loanable funds curve.

Question 19

In the absence of the Ricardo-Barro effect,an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 20

Saving by households

Accepted Answer

A)  decreases when the real interest rate rises. 
B)  increases when the real interest rate rises. 
C)  increases when the real interest rate falls. 
D)  is unaffected by the real interest rate.

Exam 7: Finance, Saving, and Investment

If the world real interest rate falls,then a country that is a net foreign lender

Which of the following is correct?

In the global loanable funds market,

What is the influence of the expected profit and the real interest rate on the amount of investment firms make?

At the beginning of the year,Tom's Tubes had a capital stock of 5 tube inflating machines.During the year,Tom scrapped 2 old machines and purchased 3 new machines.Tom's net investment for the year totaled

In 2008,Germany had a budget deficit of 37 billion euros. This will budget deficit the supply of loanable funds and the real interest rate.

In 2007,Singapore's government ran a budget surplus of $4.5 billion. The budget surplus loanable funds and the real interest rate.

The real interest rate is in the United States compared to Zimbabwe because .

Suppose a firm has an investment project which will cost $200,000 and result in $30,000 profit. The firm will not undertake the project if the interest rate is ________.

If the Ricardo-Barro effect occurs,an in saving finances the government budget deficit and the real interest rate .

In January 2013,Tim's Gyms,Inc.owned machines valued at $1 million. During the year,the market value of the equipment fell by 30 percent. During 2013,Tim spent $200,000 on new machines.During 2013,Tim's net investment totalled

The nominal interest rate minus the real interest rate approximately equals the

National saving equals

What is the relationship between the real interest rate,the supply of loanable funds and the demand for loanable funds?

In the global loanable funds market,

-In the above figure,if the real interest rate is 4 percent,then there

The demand for loanable funds curve is

As a result of the recession in 2008,the default risk increased. How did this change affect the loanable funds market?

In the absence of the Ricardo-Barro effect,an increase in the government deficit results in a real interest rate and a equilibrium quantity of investment.

Saving by households